tv Al Jazeera Investigates Al Jazeera December 25, 2014 1:00am-2:01am EST
only on al jazeera america. >> this is a group of men who have grown rich through secretive energy deals between egypt and israel. they have cost the egyptian people billions of dollars in lost revenues. >> so it was obvious that egypt was being ripped off. >> one of the men responsible was a confidant of ex-president hosni mubarak. >> did you steal your country's natural resources? >> no!
>> the other a former israeli intelligence officer who is now suing the egyptian state. >> how much money will you be satisfied to take from the egyptians? >> i'll settle for 50 billion. have a good day. >> we investigate the role of energy in the most important relationship in the middle east - israel's peace accord with egypt - as a new balance of power emerges in the region. >> from the israeli perspective it's a game changer because their one great weakness was their energy dependent on others. >> israel has laid claim to some of the largest gas fields discovered this century. >> when gas came on stream they called that their second liberation day. >> as gas shortages sweep egypt, president abdel fata el-sissi is hoping that a clandestine deal to buy gas from israel will secure his political future. >> egypt needs gas. we can sell it. what else can be better?
>> since its foundation, israel's lack of oil and gas has been a key strategic weakness. in the 1960s it looked to neighboring egypt. >> egypt has been extracting gas from the waters off its coast since the 1960s. during the 1967 arab-israeli war, israel seized the sinai peninsula and a number of oil fields there. this set the stage for this relationship of energy interdependence. >> in the 1970s, up to two-thirds of israel's oil came from land it illegally occupied. as the united states began brokering talks that would lead to the camp david accords, the state department made a secret offer to appease israel. the u.s. agreed to supply israel with oil for five years if its own supplies "are disrupted and it cannot meet its normal requirements". >> it was always a factor in the relationship between egypt and
israel. the sinai was and still is a producer and when you got the first camp david part of the issue was how was that going to work? will the egyptians get the oil from the sinai? >> when the camp david accords were signed in 1978, israel agreed to a full withdrawal from the sinai peninsula. the united states formally committed itself to guarantee israel with energy for a further fifteen years. >> the u.s. basically bought and has paid significant sums to try to reassure both parties in that agreement that we would be there to keep things in a stable secure situation. >> but there was a further agreement at camp david that was rarely discussed. egypt committed itself to supplying oil to israel. >> those accords guaranteed israel the right to bid on oil supplies from the sinai
peninsula. israel had become dependent on oil imports from that area. so as part of this agreement they wanted to ensure that they continue to meet their energy needs using those oil fields. >> these are common interests that are not particularly advertised but they do tend to cement a relationship. when you look at a relationship or a treaty, what you're looking at is, is as a weave of interest. that's what sustains it. if you had agreement to have an oil condominium, that's helpful. that's what we're trying to put in place and then it's much harder to tear her apart. >> the peace accords also wove together the interests of two powerful groups. egypt's military and intelligence services began regular meetings with their israeli counterparts. this was to have profound effects on egypt's future. >> from the 1990s on the relationship between the
egyptian military and israel was actually of almost an alliance of close cooperation in terms of intelligence sharing. >> the deal did bring certain israelis from the intelligence services and egyptians from the intelligence services closer together. the peace dividend that we've seen is that members of the business elite specifically the corrupt business elite and members of the intelligence agencies, they built lots of close relationships. >> the military in egypt are our partners in collaboration in this region. the army the government see us as legit which is very important and we should encourage this. >> in 1993 another historic deal was again to entangle energy policy with proposals for middle east peace. in the oslo accords, the palestine liberation
organization recognized the state of israel. egypt was repaid for its role in convincing the palestinian leadership to sign the deal. edward walker was the u.s. ambassador to egypt - and then israel - in the 1990s. >> we were looking for the gas and the use of gas as a mechanism for tying these countries together. whenever you have mutual interest between even two enemies and they agree on how to deal with it so they both profit that's perfect. that's exactly what you want because people they like money and money talks. >> what followed next was israeli investment in a 1.2 billion dollar petroleum refinery in alexandria. established in 1994, the middle east oil refinery or "midor" brought together individuals from egyptian and israeli intelligence. together they masterminded a scheme to ensure the project bypassed popular opposition in
egypt. it made them very wealthy and it was also backed by the both governments and the united states. >> i got to know the midor people as they were trying to get their permissions to go forward with their project. there was always some kind of particular concern about the status of the project because it gave recognition to israel in a way that many people in egypt were not comfortable with. and it gave them control over a portion of economy when you have that kind of cooperation. but that was overcome. >> that one company was run by two men who both had very close connections to the intelligence services and to ruling regimes who are managing to extort a vast amount of wealth basically from the egyptian public and that money was clearly circulating back through the elite. >> it always boils down to is it enough of an income earner to be
able to cover everybody? and i think the answer is yes, and that's why it got started and was able to overcome its political problems in the first part. >> the chief architect of egypt's energy deals with israel is hussein salem. he's a former intelligence officer once convicted of fraud in the united states. he was the hidden facilitator behind the mubarak regime. >> he is walking with his minder. >> now living in exile in spain, salem continues to wield influence over egypt's energy policies. >> he is still coming my way. he's turning left. >> hussein salem for me is the is the mysterious guy, the shadowy figure and obviously he was very influential. >> he built up relationships with israelis and with israeli intelligence in the 70s and 80s.
he was based in the u.s. when the negotiations over the peace deal with the israelis were taking place. >> well, he's, he's, he's an engaging guy and very wealthy. he could he could make things happen, and so i liked him. because as ambassador, i want someone who can make things happen. >> while hussein salem was the brains behind the midor refinery project the company's boss was salem's protege, an engineer named sameh fahmy. both men would become central protagonists in the hidden story of egypt's energy industry. fahmy and the israelis got on notoriously well. >> sameh fahmy is an egyptian gentleman. undoubtedly, very strict, very knowledgeable excellent english, very polite, straightforward. i had good meetings with him. >> salem soon cashed out of the midor project making a
bountiful profit. he arranged for his protege, sameh fahmy to become egypt's petroleum minister. >> the presence of sameh fahmy as minister defines a new era of the energy sector in egypt where the energy resources is managed by the intelligence of egypt. >> in a confidential document obtained by al jazeera the egyptian government's investment authority promised to grant an exclusive license to sell egypt's gas to a new company set up by salem p called emg, or "east mediterranean gas." sameh fahmy was the petroleum minister at the time. salem now had his sights on a bigger and more controversial economic prize - the building of an undersea pipeline between al-arish and ashkelon with a single objective - to pump cheap egyptian gas into israel. >> that was when the basic
principle was established that egypt would sell the gas to emg; emg would sell the gas on to the israelis. >> this agreement didn't take the approval of the parliament at that time and instead they have allocated the gas directly to a company that has been established by the hussein salem and his former intelligence people as well like him. >> partnering salem in his newly formed company was yossi maiman, a former agent from israel's foreign intelligence service mossad. maiman had earlier made millions as salem's partner on the midor project. in 2004, maiman described himself to israel's energy minister as the sole broker for selling egypt's gas. >> i never liked him from the first time i saw him and with all due respect, a person that comes to you with a note which he didn't show by the way, saying that he has a note that
gives him the exclusive right to be the broker of gas between egypt and israel i would raise an eyebrow and that's what i did. >> maiman then hired shabtai shavit a former director of mossad, to become a senior executive with emg. >> i understood that shabtai shavit was hired by maiman in order to promote or to enhance the deal. why him? a former mossad chief? beats me. i don't know >> we were talking to a young lady saying she just wanted her voice to get out there. >> by the thousands, they're sending their government a message. >> ahead of 'em is a humanitarian crisis where tens of thousands of people are without food, water, shelter.
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this policy. >> there's no status quo just the bottom line. >> what is the administration doing behind the scenes? >> real perspective. "consider this". monday through thursday, 10:00 eastern. only on al jazeera america. >> hussein salem and maiman between the two of them, had these links and networks that extended through the intelligence services and the business community which enabled them to ensure buy-in from the key elites from the people who needed to sign off on these deals to happen. both governments in israel and egypt wanted to keep the true identity and role of east mediterranean gas hidden from view. >> it was unclear to us who we were making the deal with; what are the real numbers; what what's the profit; what are the costs of this deal. >> it was so covert. it was so behind the scenes.
it was so un-transparent that it called for attention. despite the opposition of israel's then energy minister, the deal went ahead with the blessing of egyptian president hosni mubarak and israel's prime minister ariel sharon. sameh fahmy the egyptian minister of petroleum, signed a memorandum of understanding with his israeli counterpart. the memo emphasized that the supply of gas from egypt to israel will contribute "to enhancing peace and stability in the middle east." it allowed emg to construct a pipeline to supply israel with gas for at least 15 years. >> it is the kind of agreement that was helping to cement the egypt-israel treaty and that's why we were always very positive about it without getting into the whole corruption side of it.
>> when he looked closer at the deal paritzky found that israel benefitted with very cheap gas. >> the deal that they offered was too good to be true, too good to be true. the prices were ridiculous. i didn't know what it was, but it was too good to be true. >> the agreement included secret terms set out in the egyptian government document from 2000. these fire sale prices remain unprecedented in the natural gas industry. >> in the same year, gas was being exported in other countries, to japan for $12.50. not $1.50, $12.50. in the same year germany was receiving piped gas from russia for over $8.00 $8.00, $9.00, $10.00 per unit. so this is vastly more up to eight times more what the egyptians were receiving.
>> the end consumer was the israeli electric company the country's primary power supplier. and at that time it was egyptian gas keeping the lights on in israel's largest city tel aviv. >> egypt would sell to this company with less than $2 per million btu where egypt at that time were importing fuel oil to run the electricity power stations with around $9 to $10 per million btu. >> after the first year, the israelis finally consented to, okay they'll pay more. but the egyptians were still only getting $3.00. the fact that the egyptians were now receiving $3.00 rather than $1.50, meant they were still being ripped off and still vastly underpricing the gas and in fact the egyptians lost more money in 2010 at that higher price than they did in 2008 at the lower price because they were also exporting more gas.
>> even now, the price that israel paid for egypt's gas is so sensitive that officials at the electric company remain unwilling to discuss it. >> the deal with egypt was very important for israel electric and for the state of israel. >> what was the price of the gas that israel was buying from egypt and the quantity? >> you can't talk about the terms of this? >> no, no. >> the only thing that i i, i would tell is not the price, i am not in a position to quote the numbers. >> the egyptian state was selling the gas to emg dominated by two men: hussein salem and yossi maiman. they were receiving it from the egyptians for $3 and then selling it on to the israelis for $4.5 and basically pocketing the difference.
>> we tracked down yossi maiman as he arrived at his corporate headquarters north of tel aviv. the gated compound was once the center of a business empire worth billions. he rarely speaks in public and refused our earlier requests for an interview. >> there's been a lot of money you've made off of the sale of gas below market price from egypt. >> so you say. >> what was the price you paid for egypt's gas? >> more than adequate for egypt. >> do you think it was fair? >> yeah. >> why don't you disclose the price? >> many people feel that the gas was sold at prices that weren't fair and that the government ripped off the people. do you have any message to the egyptian people? did they sell for a fair price to israel? >> many people think it's very dangerous to swim in australia because of both, jellyfish and sharks. i am no jellyfish and no shark have a good day. >> when was the last time you talked with hussein salem? >> see you all. >> what's hussein salem like in person? >> next question (laughter)
>> okay. >> all right. okay. >> the emg deal relied on israeli political support as well as one more crucial link. salem's relationship with mubarak. >> emg had nothing but the political support of the mubarak regime. the emg had no assets. before it sold even one molecule of gas. it was already estimated at over $2 billion. >> when you've gotten a repressive undemocratic regime that's trying to siphon off as much money as it can, then you need to find ways to do that and that is largely the role that emg played. >> nobody is telling stories out of schools to say that people
who had that kind of position with mubarak did very well financially, one of the problems they had ultimately. >> we tracked hussein salem to one of the seven mansions he owns in spain. >> marhaba clayton swisher, (arabic) al jazeera how are you? >> ah good. >> we, we would like to ask you some questions. >> no!...no! >> salem was convicted in absentia of corruption and squandering egypt's resources. police confiscated assets worth millions of euros from his properties in spain. but he avoided extradition to egypt. >> what's your relation to former mossad officer yossi maiman? was he your business partner? >> i don't answer any questions. >> lets be respectful about this. >> we call the police, i don't want interview. >> i want to be respectful about this mr. salem. >> no...no. >> do you feel you are above the law that you don't owe the egyptian people an explanation? >> i don't answer i don't answer >> why don't you want to answer? >> i don't answer >> you don't answer to journalists or you don't answer to the courts? >> i don't answer to you. >> you don't think that you have a moral obligation to speak to
your people? >> havier...por favor >> do the egyptian people have a right to know what you did with the country's natural gas? >> laughs >> you think that's funny? the egyptian people are without power mr. salem and you live quite well here in madrid. you don't feel that you owe an explanation to the egyptian people about what happened? >> i will not answer you! >> mika minio-paluello analyses energy prices for a london based think tank. he's worked out how much the emg deal has cost the egyptian people. using prices from the same confidential documents obtained by al jazeera, he made a calculation based on each year the pipeline was operating. >> in 2008 when the gas first started being pumped the israelis and emg were paying the egyptians $1.5 per unit. and this meant that in 2008 the egyptians took in under one hundred million dollars for the gas they exported out the pipeline. now at that same point in time
the japanese were paying over $12, $12.6 per unit of gas, egypt could have exported gas there instead and instead of taking less than one hundred million dollars it could have taken in seven hundred and seventy million dollars. >> mika then worked out how much in total egyptian taxpayers had subsidized israeli consumers over the three-years that the pipeline was operating. >> my calculations show that egypt lost $1.8 billion through this deal. egypt could have made $1.8 billion more dollars by using the gas in other ways. >> mika also calculated the total revenue that the egyptian people have lost from deals its government made via hussein salem and his israeli associates. this includes contracts exporting gas to other countries as well as israel.
>> that adds up to a total loss to the egyptian people of possibly over eleven billion dollars. almost all of these involved hussein salem at some point in time in arranging the deals. >> what you have to say to your people? do you feel ashamed that you've been convicted of stealing the country's natural resources? >> i will no answer. >> are you guilty of those crimes? >> no answer. >> that's not a yes or a no, are you saying? >> no answer. >> you not saying you're guilty or not guilty. >> no answer. >> finally mika estimated the personal wealth that hussein salem made from the emg deal. even before any gas was sold he had turned a $300 million investment into a windfall. >> during the same period that the pipeline was built he sold 37 percent of his holding. he sold the one chunk for $2 billion, and the other chunk for $2.2 billion. so that's $4.2 billion that hussein salem made before the gas had really even started pumping.
he made an investment of $300 million and taken in $4.2 billion. >> did you steal your country's natural resources? >> no >> no? >> coming up how emg shareholders now hope to reverse the pumps on their pipeline - and sell israeli gas to egypt. >> did you steal your country's natural resources? >> no, no no! >> al jazeera america morning news >> good morning and welcome! to al jazeera america >> real stories... real reporting... real news... a deeper look... >> a much better forecast for today >> with an international edge >> why is this so important and how close is this deal? >> from our award winning news teams across america and beyond >> we begin with breaking news coming out of the west bank... >> news that matters... al jazeera america morning news every morning 7 eastern only on al jazeera america
"you folks need to ride the bus... ride it for $1.50". is this in its own way redistribution? >> it's not just about altruism though, you know? it's about economic development. we need to make sure workers can get to work. it's about economic opportunity. >> in a transit system that has had 5 fare hikes in 5 years, price is a sensitive point. san francisco is the only other major metropolitan area with a similar two teired system, with 20,000 people buying half price fare cards. in king county it could cost 7 to 9 million dollars in lost fare revenue every year, plus a few million more for administrative start up costs. >> we're eliminating routes, we're cutting back service in some areas, there's pressure on the system in terms of money and we're saying "okay, we're gonna make things cheaper"... so it seems almost counter intuitive. >> yeah, well not everyone has the money to afford the kinds of fares we've arrived at in king county... we need 'em, we need 'em to bring in the revenue to keep the
busses on the road. >> there was no vote on this the policy came out of a county council comity. the new fares, higher and lower, start in march. >> saturday on tech know. a brutal killing. a thorough investigation. >> we're pushing the envelope. >> but this is no ordinary c.s.i. >> what went on right before that animal died? >> hunting the hunter. >> we're gonna take down the bad guys. >> solving the crime. >> we can save species. >> tech know's team of experts show you how the miracles of science. >> this is my selfie, what can you tell me about my future? >> can affect and surprise us. >> don't try this at home. >> tech know, where technology meets humanity. saturday at 7:30 eastern. only on al jazeera america. >> al jazeera's investigative unit examined how a former intelligence officer made billions of dollars from corrupt energy deals approved by the egyptian state. now we reveal how the legacy of corruption has so damaged
egypt's energy sector that it stands to become dependent on israel. >> egypt mismanaged its gas industry. it raises the possibility that israel in contradiction to the history of the energy relations, will be supplying egypt. >> these are the men who have devastated egypt's energy industry. their story is closely linked to the most important relationship in the middle east - egypt's peace accord with israel. it is a story that has now come full circle. the former field marshall, abdel fata el-sissi won a largely ceremonial presidential poll. the elected leader that sissi overthrew in a military coup mohammed morsi remains in jail. sissi's victory has quashed the arab spring while protecting the peace accords with israel.
>> i think now with the return of sissi and the return of order, i think we see now the spring. we really do. >> he's attractive because he's not morsi. and the concern has always been to maintain and sustain the relationship between egypt and israel. >> when the arab spring swept egypt, a major motivator largely ignored by the west was the unleashing of anger against the government's policies toward israel especially the energy deals involving salem and maiman. >> one of the reasons i think for the revolution of 2011 the issue of selling the egyptian gas at low prices to, to israel. it was one of the issues that were highlighted all over the tahrir square and many felt betrayal. >> almost any egyptian that i mention my work to says,
why did we export the gas to israelis given what they are doing to the palestinians? and why do we export it to them in 2009, during operation cast lead? the electricity that powered that invasion was in large part supplied by egypt. subsidized egyptian fuel was underwriting the israeli attack on gaza, now when egyptians realized that they were like what? >> mubarak was ousted by a wide coalition of demonstrators with the acquiescence of egypt's military itself threatened by the mubarak regime's corruption. as the armed forces assumed temporary control, emg was still using the pipeline to send gas to israel, even though salem, its founder had fled. >> hussein salem cleverly enough, had absconded within days of the 2011 revolution starting and run off with a load of money in his bags.
anger at the emg deal prompted frequent attacks on the pipeline carrying the gas to israel. more than a dozen bombings brought the flow to a halt. in april 2012, the egyptian army intervened. >> the military was trying to kind of send a sort of olive branch to the revolutionaries by at least temporarily halting those gas sales and canceling that that contract. >> but the decision to close the pipeline would have far reaching consequences. israel had insisted the emg contract contain a clause obligating egypt to provide a 'continuous and uninterrupted' supply of gas for 15 years. that promise allowed the emg directors to protect their own profits. so by abruptly breaching the contract the military set off the legal equivalent of a ticking bomb. >> the supply contract underlying the gas exports included specific references
that if the investments of emg and the profit-making possibilities of emg were threatened then emg would be able to go to the international chamber of commerce and to use their international court of arbitration to seek compensation. >> shorty after the pipeline was shut yossi maiman launched a barrage of legal proceedings against the egyptian government at various international courts. with allegations of corruption surrounding salem, maiman is now steering the legal action on behalf of emg shareholders. these arbitration forums tend to serve the interests of multi-national corporations. >> when you go to international court of arbitration companies almost always win, which means that if egypt loses, which is highly likely then egypt's resources can basically be confiscated in other countries. emg can say, "well we want that. we'll take this. that's worth $500 million. we'll take that.
that's worth a billion. we'll take that, that's worth a billion. >> emg has filed four separate actions at arbitration courts, including the world bank. these cases are pending ñand the sums involve are so huge that in theory they could bankrupt the egyptian state. >> what they've asked for is 8 billion dollars.. hussein salem has already walked away with $4 billion. and now the investing companies want compensation for another $8 billion because that's what they say they would have made in profit in the next years. egypt's treasury has around $14 billion of foreign reserves. eight billion dollars, that's more than half of egypt total foreign reserves they're currently using to just about keep ticking over. and all of it is because of a corrupt deal that was signed to basically support two dodgy businessmen, an israeli one and egyptian one, to siphon off public wealth and distribute among certain elite characters.
>> i asked yossi maiman to explain emg's intentions. >> you have massive cases against the egyptian government. how much money $8 billion is at stake. how much money will you be satisfied to take from the egyptians? >> i'll settle for 50 billion. have a good day. >> by the summer of 2014 egypt's energy sector is in a full blown crisis. years of corruption have destroyed its relations with global energy companies. >> the egyptian government admits that it owes the foreign companies as much as $6 billion. so this is not very enticing for foreign investors, so egypt has big difficulties in attracting foreign capital. and the problems don't end there. in addition to emg's lawsuit there is another 6 billion claim levied against egypt
this time, by the spanish energy giant union fenosa. it claims egypt has been unable to supply the necessary gas to continue running its plant on the egyptian coast. so just from known debts and legal cases, that means the egyptian state is facing liabilities of a staggering 20 billion dollars. while decades of crooked deals had undermined egypt's energy sector a presidential candidate was emerging who pledged to clean up the industry. in the shadow of the military, the muslim brotherhood candidate, mohammed morsi won the country's first free election. back in washington policy makers began to reconsider their promotion of democracy in the middle east. >> western style democracy as we see it as essential, it doesn't really quite fit the mold over there. there's a veneer of people within the region who've been educated in the west who accept those values but the overwhelming part of society does not.
>> the muslim brotherhood has pretty solid reputation for not being highly sympathetic to the west and particularly not to the united states. so it was not really in our interest to see them succeed. >> an islamic leaning government also sounded the alarm in tel aviv. >> what do they have to do with democracy? god knows and this almost stupidity to bring western values into a country which is fully islamic many of which are poor fundamental islam's, is ridiculous. >> the way the the new situation in egypt was analyzed in israel was there are two sources of power. there is the government of morsi, which is unfriendly to the israeli interest and there was the, the was military establishment which was seen as a possible partner. morsi's attempt to confront the rampant corruption in the energy
sector coincided with the trial of the former minister of petroleum, sameh fahmy, along with emg founder hussein salem, who was in exile in spain. each was sentenced to 15 years for their roles in selling natural gas to israel at below market rates. in terms of fighting energy corruption that was about as far as it would go. assisting the president was hatem azzam. he was not from the muslim brotherhood but brought with him decades of experience in the oil and gas industry. >> president morsi was facing a lot of pressure with all this network of corruption that exists in the intelligence in the military. this energy corruption network was one of the strongest reasons why the leaders, the army generals, decided to make the coup over morsi. >> the energy sector was also to
play a central role in staging the coup. suddenly there were shortages. >> we saw massive lines in petrol stations throughout the country. we also saw the electricity cuts and shortages. >> propaganda machine was, that was basically saying that morsi is behind all this; he is behind the gas cuts. his, his election was bad luck and see what's happening to the energy. >> only later would clear evidence emerge of the military's deliberate actions to spark public unrest. >> the egyptian military used the supply of gasoline in the gas station as a weapon to throw off morsi. one day after the coup all these queues have disappeared and everything goes back to normal. >> voila you know you see the all these local tv stations saying "the brilliance el-sissi has resolved this in no time
and so on. >> al jazeera america presents >> somebody's telling lies... >> it looks nothing like him... >> pan am flight 103 explodes december 21st, 1988 was the right man convicted? >> so many people, at such a high level, had the stake in al-megrahi's guilt >> the most definitive look at this shocking crime >> the major difficulty for the prosecution that there was no evidence >> al jazeera america presents lockerbie part two: case closed >> it's a chilling and draconian sentence... it simply cannot stand. >> this trial was a sham... >> they are truth seekers... >> all they really wanna do is find out what's happening, so they can tell people... >> governments around the world all united to condemn this... >> as you can see, it's still a very much volatile situation... >> the government is prepared to carry out mass array...
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>> the army ousted morsi, much of the world viewed events in egypt with horror. the military - then led by general sissi - had overthrown a democratically elected president and crushed the party that he belonged to. >> you had the worst massacre in egypt's modern history happening under sissi, when you killed more than a thousand people in less than seven hours. >> the united states was critical of the bloodshed but stopped short of withdrawing support for the regime. >> they were very careful not to say it was a coup. so and if you look back at the statements they sort of used every euphemism they could except coup. so it was not a coup let's get that straight. >> it isn't just having elections. that's wonderful. but what comes after the election? if there's not a framework for
making government work to accomplish things, then it's just it's very hollow. >> the lack of real democracy has allowed the egyptian military's partnership with israel to prosper without any public accountability. that includes the nature of president sissi's contacts with tel aviv. >> there was very clear close coordination between the egyptian military led by sissi and israeli officials at the highest levels in order to ensure a rapid transition to the kind of resumption of a military government in cairo. >> the relationship is going well. it's technically sound. they're cooperating on the military side. so it's sort of back to normal, if that would be called normal. >> but one important fact has changed. after years of plentiful gas egypt is now in the throws of genuine gas shortages.
>> egypt's desperate. there's queues outside petrol stations. almost every night there's a blackout. you never know when it's going to be. the economy is struggling, people are struggling, people are furious. >> what's happening now in 2014 is happening for real. it's not fabricated anymore that egypt is really suffering now a dramatic shortage of energy resources. >> meanwhile a staggering find has been made in the mediterranean. in 2010, israel laid claim to deepwater fields that hold up to 26 trillion cubic feet of natural gas. called leviathan and tamar these huge discoveries are the largest of their kind this century. >> if you talk to the israelis now, they're self-congratulating each other and when gas came on stream they called that their second
liberation day. and once leviathan comes on stream with the possibility of exporting gas to egypt the implications for israel will be tremendous. >> suddenly, right next door, the israeli state has more gas than it needs. suddenly the israeli state is saying, "yeah, we've got some gas. do you want to buy it? you have to pay a lot more than what we paid you." >> right now egypt needs gas. we are in close proximity. on the technical point of view it will take very short time to have flow of natural gas to egypt. >> after the coup, sissi began to arrange the deal that could secure his political future. the regime made secret approaches to tel aviv. >> since the overthrow of mohamed morsi, contacts had resumed between the
two governments. there had been several meetings. mainly from the egyptian side, the egyptians are very interested very curious to know how much the israeli government would stand up to such deal, ensure the flow of gas. >> the company that has been operating the rigs and leading israel's exploration in the mediterranean is the texas based, noble energy. they refused our request for an interview and would not discuss gas sales to egypt. we also tracked down egypt's top diplomat in israel mustafa kuny but he too refused to meet with us. israelis tell us that egypt is keeping its approaches clandestine - because the regime in cairo needs to buy time. >> what they want to is establish themselves from the domestic point of view and gain political support
and then go into economic ventures with israel. >> in january 2014 sissi put the first part of his plan in place. the reuters news agency noted that the egyptian government had quietly lifted restrictions on private oil and gas companies operating in egypt. for the first time in the country's history, companies can now import gas from any foreign energy provider. four months later, noble energy announced a letter of intent with the spanish firm union fenosa "to supply natural gas from "offshore israel to its gas liquefaction facilities" in egypt. >> noble energy have examined the notion of selling the gas to egypt. it can either be used domestically in egypt or it can go to the lng plants on the nile
delta, one of which is closed down because of lack of gas and the other which is running at only partial capacity. the two liquified natural gas or lng plants on egypt's coast at idku and damietta are key to egypt's proposed deal with israel. one is run by the spanish union fenosa - which is also suing egypt for $6 billion. lng is a method of freezing gas until it becomes a liquid. it can then be transported by tanker rather than pipeline and sold in far greater volume. >> the plants are already built. they were built at a time when cost of building lng plants was low, and they're not functioning at the moment because there's not enough gas for exports in egypt. >> today nearly all of egypt's gas is being diverted for domestic use due to the severe shortages. in doing so
the government has breached export obligations to powerful energy companies. >> each of the two companies which, which run the lng facilities lose revenues in billions of u.s. dollars just by not being able to to export the gas that they have committed themselves to export according to the contracts that they have. egyptians are interested in enabling israeli gas to go from the natural gas fields offshore israel straight to the lng facilities in egypt. >> israel has made it clear that any commercial deal with egypt needed more than just access to egypt's lng plants. it also wanted a commitment that the suez canal would always be accessible to ships carrying its gas to israel's most lucrative markets in asia. >> the changing government in egypt has meant that israel can reconsider the option of
converting some of its gas into lng in the mediterranean and then shipping that gas via tanker through the suez canal to destinations in asia. under the morsi government there was no confidence that egypt would allow such shipments to go through the suez canal. the change in government has meant that this potential can be re-examined. >> if we can get into an agreement with egypt between the companies but supplying gas to egypt this will also cement their relations, political and economic between israel and egypt. >> the israelis would love to make egypt dependent on them. that that would fit them perfectly, power-wise. and that also offers a revenue trading mechanism for the israeli state and possibly again
for maiman and hussein salem. one option for delivering israeli gas to egypt's lng plants is to lay new pipelines from israel's gas fields. but the quickest and cheapest method is to reverse the pumps on the emg pipeline from israel's gas terminal at ashkelon and then deliver it overland. >> we've already got a pipeline running from egypt to the israeli state, from al arish to ashkelon. you could reverse that. it's quite simple. it won't even cost very much money, and send the gas the other way. the israelis could put the gas in and it could come out in arish and be distributed into the, into the egyptian network. >> we discovered a clue to the deal emg is hoping to make with the egyptian government. it's buried in a bankruptcy filing from yossi maiman's holding company in the united states. a footnote reveals that shareholders are considering using emg's pipeline to transport natural gas from 'israel to egypt',
so it that can be converted into lng 'or used locally in egypt'. and emg holds a powerful bargaining chip - an 8 billion dollar lawsuit against the egyptian government. >> why are you suing the government of egypt and if you're you using economic duress to have them buy israeli gas? is that the case? >> thank you very much gentlemen, have a good day. >> are you working with the israeli government to reverse the directional flow of the emg pipeline so that israeli gas can be sold to the egyptians? >> i appreciate your insistence.. while evasive, maiman appeared reassured. >> are you working with the israeli government? >> thank you. >> are you working with the egyptian government? >> thank you gentlemen. >> the egyptian government has various ways out. now, they could just stand up and say, "enough. we've been ripped off, enough. the egyptian people don't deserve to pay out anymore." but facing pressure, facing court cases in legal spaces where they have almost no control,
they're going to look for an option that doesn't involve just standing up to outside power. that seems like more of a compromise a compromise that lets hussein salem and maiman keep making lots of money. >> in cairo, the former oil minister sameh fahmy was released from custody, pending a retrial, which is yet to happen. hussein salem is expected to return to egypt, with the charges against him dropped. the hidden story of egypt's energy industry is back on track. >> they didn't lose everything when when morsi came on board. the military sustained its relations. we still had the people we were talking to. the israelis had the people they were talking to. it was all going on while morsi was in power. he hadn't been there long enough to really change the structure that much. so you had the same people or their replacements in place with that same basic interest involved. >> i will not answer you. >> will you answer to the judges? >> yes i will
>> when are you going to answer to the judges? >> when they call me. >> we would be happy to come in and have an interview if you will provide us. are we welcome? >> no >> any message to the egyptian people? >> israel will be the only one that will end up stronger out of this and all of the arab people around will end up much more weaker. >> it's basically saying to the israelis look you want to screw us here's a tool you can use to screw us. if you want to turn off our gas because you want to put pressure on us, here you can do it. if you want to stop our economy, here's the tool to do it. >> the egyptian public can make a calculation that it's happier to have electricity 24 hours a day because they deal with israel in getting natural gas or they would prefer to be in the dark for some hours a day as a matter of principle.
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